Articles Discussing Case:

Continuing the saga of whether continued employment is sufficient consideration to support a restrictive covenant agreement, the Illinois Supreme Court, on September 25, refused to review Fifield v. Premier Dealer Services, Inc., No. 1-12-0327, 2013 IL App (1st) 120327 (Jun. 24, 2013)—a controversial Illinois Appellate Court decision on the enforceability of restrictive covenants. The Illinois Supreme Court’s decision means that Fifield’s mandate that two-years of continued employment is required for an employer to enforce a post-employment restrictive covenant is now binding precedent in a large part of Illinois.

In July 2013, we reported on the First District Appellate Court’s ruling in Fifield et al. v. Premier Dealer Services, Inc., in which the court upended Illinois law regarding what consideration is needed to create an enforceable post-employment non-compete agreement. Before Fifield, the conventional wisdom in Illinois was that, at least at the outset of employment, an employer need not offer an employee any additional consideration beyond at-will employment in exchange for a non-compete agreement. In Fifield, the Appellate Court rejected that reasoning, holding that at-will employment is valid consideration for a non-compete agreement only if the employee is actually employed for at least two years after signing the agreement. Under Fifield, if at-will employment is the only consideration offered in exchange for a non-compete agreement, the agreement will be rendered void if the employee’s employment ends for any reason before the two-year mark. (A full summary of the decision is available in our July 2013 alert.)

In July 2013, we reported on the decision by the Illinois Appellate Court for the First District in Fifield v. Premier Dealer Servs., Inc., No. 1–12–0327, 2013 WL 3192931 (June 24, 2013). The Appellate Court ruled that there must be at least two years or more of continued employment to constitute adequate consideration in support of a restrictive covenant where no other consideration is provided. See id. at *4–5. The court’s ruling applies to all at-will employees, new or existing, who have not reached at least two years of continued employment after execution of a restrictive covenant agreement. This two-year threshold throws into question the enforceability of any restrictive covenant applicable to an at-will employee with less than two years of service whose agreement is governed by Illinois law.

In a decision handed down June 24, 2013, the Illinois Appellate Court, First District, found a restrictive covenant unenforceable due to lack of adequate consideration. Although this is not the first time an Illinois court has held that there must be at least two years of continued employment to constitute adequate consideration to support a restrictive covenant, the ruling in this case was remarkable because:

The Illinois Appellate Court for the First District has ruled that the commencement of at-will employment is not adequate consideration to support the enforcement of post employment restrictive covenants.

The Illinois Appellate Court’s recent opinion in Fifield v. Premier Dealer Services, Inc. takes an aggressive stance on continued employment as consideration to support enforcement of a non-competition or non-solicitation agreement.